Story of Bheema and Jatasura is found in the Jatasura Vadha Parva which is part of the Aranyaka Kanda in the Mahabharat.
Jatasura served the Pandavas in disguise. He was waiting for an opportunity to abduct them. But he did not have the strength to defeat Bhima. So he waited for Bhima to go out to hunt.
He got his opportunity one day and soon he dropped his disguise and took his real form which was distorted, terrible and gigantic.
He grasped the weapons of Pandavas and kidnapped Yudhishtira, Nakula, Sahadeva and Draupadi. But Nakula managed to escape and went in search of Bhima.
While they were being carried by Jatasura, Yudhisthira tried to make the demon understand social conduct and dharma. But it had no effect of the asura.
To slow down the pace of Jatasura, Yudhisthira bore down heavily on him.
Yudhisthira was expecting Bhima to arrive at any moment.
Sahadeva argued with Yudhisthira that they should start fighting the demon like Kshatriyas – kill or get killed.
While Sahadeva was arguing with his elder brother, Bhima appeared on the scene.
Bhima told the demon that he had doubted his intentions earlier itself. Bhima had noticed the demon, who was then in the disguise of a Brahmin, checking out the weapons of Pandavas.
Bhima and Jatasura engaged in a bout of wrestling. They then threw boulders on each other. The two then uprooted trees and hit each other. The battle saw the destruction of a large number of trees.
The two then again engaged in fist fighting. Bhima clenched his first, like a serpent with five heads, and struck Jatasura’s neck with great force. The blow of the fist exhausted the demon.
Bhima lifted Jatasura and threw him down with great force. He then shattered all the limbs of the demon. Holding the demon with his elbow, Bhima detached the head of the demon from his body.
Jatasura’s head was severed and feel down on the ground, drenched in blood, the eyes bulging and the teeth clenched like a fruit dislodged from a tree.